Why buy risky stocks when boring bonds offer similar results right now - The Globe and Mail
Why buy risky stocks when boring bonds offer similar results right now - The Globe and Mail
摘要: Why buy risky stocks when boring bonds offer similar results right now
Ian McGugan
Published
15 minutes ago
Open this photo in gallery:
A trader
正文
Why buy risky stocks when boring bonds offer similar results right now
Ian McGugan
Published
15 minutes ago
Open this photo in gallery:
A trader works on the floor at the New York Stock Exchange, Sept. 14.
Seth Wenig/The Associated Press
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The stock market has a problem. It’s called math.
On the one hand, bond yields are surging higher. Higher yields make bonds more attractive compared with shares.
On the other hand, mammoth amounts of capital are flowing into the artificial intelligence sector. Earnings, though, have yet to start flowing out.
Put rising bond yields and AI’s questionable economics together and the math supporting today’s lofty stock prices begins to look shaky.
For now, investors are waiting to see what happens next. Both the S&P 500 index in the United States and the S&P/TSX Composite Index in Canada have barely budged in four months.
But don’t mistake that stability for complacency. Investors are nervous. You can see that in the recent rash of delayed initial public offerings from companies as varied as smart-ring maker Oura, nuclear-services expert Holtec and Bamboo Insurance.
The anxiety is also evident in declining market breadth. In both Canada and the U.S., a handful of companies are powering most of the market’s gains. While broad stock market indexes are still hovering near record highs, the reality for many individual companies is far grimmer. Thirty-eight per cent of S&P/TSX Composite companies and 43 per cent of S&P 500 companies are 20 per cent or more below their 52-week highs, according to Bloomberg.
One major reason for this creeping malaise is the bond market. Bond yields, which ultimately determine everything from mortgage rates to what you pay for a car loan, have been on fire in recent months. This week, the yield on the world’s most widely followed bond-market benchmark, the 10-year U.S. Treasury bond, hit its highest